To investigate the mechanism for increased ketogenesis following treatment with the SGLT2 inhibitor dapagliflozin in people with type 2 diabetes. The design was a double-blind, placebo-controlled, crossover study with a 4-week washout period. Participants received dapagliflozin or placebo in random order for 4 weeks. After each treatment, they ingested 30 mL of olive oil containing [U-13C]palmitate to measure ketogenesis, with blood sampling for 480 min. Stable isotopes of glucose and glycerol were infused to measure glucose flux and lipolysis, respectively, at 450-480 min. Glucose excretion rate was higher and peripheral glucose uptake lower with dapagliflozin than placebo. Plasma β-hydroxybutyrate (BOHB) concentrations and [13C2]BOHB concentrations were higher and glucose concentrations lower with dapagliflozin than placebo. Nonesterified fatty acids (NEFAs) were higher with dapagliflozin at 300 and 420 min, but lipolysis at 450-480 min was not different. Triacylglycerol at all time points and endogenous glucose production rate at 450-480 min were not different between treatments. The increase in ketone enrichment from the ingested palmitic acid tracer suggests that meal-derived fatty acids contribute to the increase in ketones during treatment with dapagliflozin. The increase in BOHB concentration with dapagliflozin occurred with only minimal changes in plasma NEFA concentration and no change in lipolysis. This finding suggests a metabolic switch to increase ketogenesis within the liver.